Honda's Grom Is a Hit -- but Should You Buy It?

"The Grom is tiny, gutless, slow, and perfect. It's the kind of motorcycle that probably made you enjoy riding in the first place. Invariably, it'll make you enjoy riding again." -- Road & Track

"... the 2014 Honda Grom is the perfect bike for a first timer, yet still fun enough for the most experienced riders." -- HiConsumption.com

"If you've been eyeing an affordable two-wheeler to jet around town that's as simple to park as it is to keep running, then the Grom is for you." -- MotorcycleUSA.com

These are just a few of the nice things that motorcycling enthusiasts have been saying about Honda Motor's (NYSE: HMC  ) new street-legal pit bike, the Grom. Although barely knee-high to a grasshopper when placed next to a Harley, Grom has taken the motorcycling world by storm.


Introducing the Grom. Source: Honda Motor.

Featuring a 47.4-inch wheelbase and skateboard-ish 30.1-inch seat height, the Grom is positively tiny -- but that's not a bad thing. For new riders, the Grom puts you low to the ground, so you've got less distance to fall. And if the Grom happens to topple over on top of you, chances are its 225-pound curb weight won't do too much damage.

Meanwhile, Grom's sub-$3,000 starting price won't hurt your wallet much, either. And the bike's easy on the pocketbook after purchase, too. Its 124.9cc air-cooled, electric ignition, single-cylinder four-stroke engine positively sips gasoline. Estimates suggest that filling up Grom's 1.45 gallon fuel tank will take you more than 100 miles for a fill-up cost of about 5 bucks.

100 miles will get you quite a few laps 'round the office on Honda's Grom. Source: Honda Motor.

It may not be a particularly comfortable 100 miles, of course. The bike's tiny size means this is no long-distance cruiser. But chopped up into shorter increments, Grom could mean multiple mile-long spurts of fun -- and again, at $3,000 or thereabouts, it's fun a new rider can afford.

What's Honda up to?
Yet this raises a question: If Honda's making only a measly $3,000 in revenue -- not profit -- from each Grom it sells, what's the point of selling the thing at all? You just know the company's $20,000 Gold Wing cruisers have more padding for profit margin. So what is Honda's game here?

In short, Honda's playing exactly the kind of game you'd expect an uber-profitable multinational corporation should be playing: Crushing the competition, grabbing market share, growing sales and profits. With $14.2 billion in annual revenues from its motorcycles division, Honda is already nearly three times bigger as a bike business than rival Harley-Davidson (NYSE: HOG  ) , and several times bigger than Polaris (NYSE: PII  ) , which owns America's oldest bike brand, Indian Motorcycles.

Honda's not as profitable as these rivals, of course. Both Harley and Polaris tend to earn profit margins nearly twice as big as Honda's on their bikes. But the 8.2% pre-tax profit margin that Honda does get on its bikes is still more than twice the profit Honda earns on a dollar of revenue brought in by its better-known car division.

We make it up on volume
This being the case, Honda has a real interest in growing sales at its bikes division. Sales of Gold Wings, sales of Interstates and Furys -- and yes, sales of the Grom as well. For at its most basic level, the Grom is an advertising play for Honda. The sub-$3,000 price point is guaranteed to attract press and grab eyeballs. The rave reviews that Grom garners also serve to burnish the Honda brand.

$3,000 -- a Chihuahua-sized bike at a Chihuahua-sized price. Source: Honda Motor.

In theory, at least, once buyers buy the Grom and find they like it, they'll be more inclined to make their next purchase a Honda bike as well. And buying a Honda to replace that next trade as well.

Lather, rinse, and repeat a few sales "cycles," and Honda can make quite a bit of coin on that first little Grom.

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Read/Post Comments (18) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 21, 2013, at 12:22 PM, cityperson wrote:

    Grom, sounds like a back ake.

  • Report this Comment On September 21, 2013, at 12:38 PM, kirk66 wrote:

    35 yrs of riding. Cruisers to Sportbikes. I left it all for a KLR. Slowed down and now look at the sights around me. The Grom is perfect for two reasons: 1- it will remind you that fast isn't always fun 2- If you have a 15yo daughter like me then the bike is great from a MSF course and getting her off the dirt and in the street. But it looks like you can put 70/30 ds tires on it for more adventure.

  • Report this Comment On September 21, 2013, at 12:39 PM, TMFDitty wrote:

    I was thinking it sounded more like a Norse god, but that was actually Crom, and from Robert E. Howard's Conan series.

    "Crom was their chief, and he lived on a great mountain, whence he sent forth dooms and death. It was useless to call on Crom, because he was a gloomy, savage god, and he hated weaklings. But he gave a man courage at birth, and the will and might to kill his enemies, which, in the Cimmerian's mind, was all any god should be expected to do." -- Robert E. Howard: "The Tower of the Elephant"

  • Report this Comment On September 21, 2013, at 1:53 PM, shakabrah49 wrote:

    Looks fun !!!! Can't wait to try it then buy it.

    This a great addition to the downside of my motocross/supercross career.

  • Report this Comment On September 21, 2013, at 2:18 PM, Cameronius wrote:

    I've been riding for more than 30 years and have owned and ridden cruisers, sportbikes, dirtbikes and enduros. I've ridden the top of the line from almost every manufacturer, from BMW to Harley to KTM to Indian to the Zero electric bikes. I haven't yet ridden a Grom, but I did sit on one the other day. It felt like it'd be an absolute blast to ride! I've owned some awful big bikes in my time, but I currently enjoy ripping around town on my NX125 just about as much as I love riding my '98 Honda Super Hawk (prior to these two bikes, I owned a VTX1800 and a CBR600F3). Bigger doesn't always mean better and if I had 3 grand I didn't know what to do with, the Grom would definitely be on my short list of bikes to own! Nice job, Honda!

  • Report this Comment On September 21, 2013, at 4:46 PM, jri3 wrote:

    Honda's Grom is one of the most exciting motorcycles to be offered by Honda this year but don't forget the other, fun, easy to ride (and more road worthy) options. There is the NC700x with its 70 mpg rating, easy to use engine, available DCT transmission and fantastic price. Or how about the cruiesresque Honda CTX700? It is a whole new design from Honda making it a cruiser in it's own right but not a copy of 1930s designs. The Grom is cool but if you want one you're going to have to be quick. They are being snapped up just as fast as they hit the dealer's doors.

  • Report this Comment On September 21, 2013, at 4:54 PM, Kummin wrote:

    can u stop hyperventilating long enough to give the top speed? And will you live to tell about it if you take it on the highway?

  • Report this Comment On September 21, 2013, at 6:46 PM, Albert0Knox wrote:

    It is good to see the Grom, along with the new Honda 500s and 700s. Recently motorcycles have been growing larger and heavier. Light bikes are fun. I recently added a Triumph thruxton to my stable and it's a Hoot!

  • Report this Comment On September 21, 2013, at 6:47 PM, FIAN2 wrote:

    Grom is Russian for Thunder

  • Report this Comment On September 21, 2013, at 7:50 PM, Otterhound wrote:

    I have a Yamaha YSR50 that I have put over 28,000 miles on over the years .

    Street legal and pure fun .

    These little bikes are great and I have road raced many much larger machines .

    I have had my YSR on Interstate highways and the Pa turnpike .

    People actually notice it more than the larger machines on the road .

    No reason that the Grom should be overlooked .

  • Report this Comment On September 21, 2013, at 8:39 PM, JackinAJ wrote:

    @Kummin...I had to read a bunch, but I found a post where the guy said it tops out at 60 mph on the flat, maybe 65 downhill with a stiff tailwind.

  • Report this Comment On September 21, 2013, at 8:51 PM, norton750 wrote:

    This is exactly the sort of bike that made Honda in the first place. Small, fun, well made bikes for a low (ish) price. I hope they sell a ton of them. Motorcycles can solve at least some of our modern transportation issues. If you haven't tried one maybe you should. There is however, unlike 1964, completion from Korean bike makers offering a 250 for about the same money, and even more important, $3000.00 will still buy a pretty decent full size machine on the secondhand market. So good luck Honda.

  • Report this Comment On September 21, 2013, at 10:51 PM, rickinphil wrote:

    Harleys are so overpriced and overrated it is nuts. I put 76,000 miles on a Yamaha Venture in 5 years, loved it and barely any maintenance. And while an Electraglide was over $20,000, it only cost $9,500.

  • Report this Comment On September 22, 2013, at 12:04 AM, normgarry wrote:

    A $3000 DONORcycle will ensure there are plenty of fresh organs for people who need them.

  • Report this Comment On September 22, 2013, at 12:06 AM, ktbonner wrote:

    What they really need to do is come out with something similar to the old mid 70s cb350 bikes.

    Seems like all the makers want to go to the big cruising bikes, rockets, goldwings, or 650cc street/trails. Nobody wants to make a good small street bike anymore.

    200cc to 500cc make great city bikes with potential for longer rides.

  • Report this Comment On October 26, 2013, at 5:09 PM, pssprtdrvr wrote:

    Honda's Super Cub & the later Passport is far superior, practicality-wise. I suspect they will also prove safer. I wish Honda would start importing those again.

  • Report this Comment On November 18, 2013, at 2:31 PM, buckyh wrote:

    @ktbonner:

    Right on the money! A good 500 will get you wherever you need to go faster than the law allows. I rode for 35 years with 5500 and less.

    Disclaimer - I have my "Geezer Glide" Harley now and love it.

  • Report this Comment On November 18, 2013, at 4:10 PM, FlyND wrote:

    Older 350cc and 450cc Hondas would do 100 mph if you got lucky. I say that because some would others never did.

    Anyway that did make good power and ran good. but compared to todays bikes suffered a severe reliability problem..

    If you ran them hard they wore out fast and visa versa.

    Hoda makes fast 750s and slo 750s the cruiser bikes have small cams and small intakes and quiet exhaust.

    The rockets have state of the art serious engines, chassis, suspension etc.

    What I'd like to see is a combination cruiser/rocket

    Like a 500-1100 hot rod that has hints of the UMJ but not so much that is suffers technology wise.

    Fuel injection=good...ABS=not needed.... nice suspension=good...Trick suspension=not needed

    Batman style bikes=silly=not needed.....

    I know that Yamaha and Suzuki had tried to do this, the later with the King "B", and the numbers just weren't there. But that was because they went high end with everything and it showed in the price tag.

    I'd like to see a 750 twin cruiser with a 130mph topend, decent ergonomics, nice styling, mag/tubeless wheel/tires, belt or shaft drive.

    I could go on....

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